C Ltd has two departments A & B. Overhead is applied based on direct labour hours in department A and machine hours in department B. The following additional information is available: Department A Department B Budgeted Overheads $300,000 $360,000 Budgeted direct labour hours 50,000 40,000 Budgeted direct labour cost $240,000 $330,000 Budgeted machine hours 68,000 80,000 i) Compute the overhead rate for Department A. ii) Compute the overhead rate for Department B. iii) Given that the actual overheads were as follows Direct labour hours Direct labour cost Machine hours Actual overheads Dept. A 45,000 $60,000 25,000 $285,000 Dept. B 35,000 $50,000 75,000 $320,000 Calculate the under- or over-applied overheads for each department and for the organization as a whole.
Process Costing
Process costing is a sort of operation costing which is employed to determine the value of a product at each process or stage of producing process, applicable where goods produced from a series of continuous operations or procedure.
Job Costing
Job costing is adhesive costs of each and every job involved in the production processes. It is an accounting measure. It is a method which determines the cost of specific jobs, which are performed according to the consumer’s specifications. Job costing is possible only in businesses where the production is done as per the customer’s requirement. For example, some customers order to manufacture furniture as per their needs.
ABC Costing
Cost Accounting is a form of managerial accounting that helps the company in assessing the total variable cost so as to compute the cost of production. Cost accounting is generally used by the management so as to ensure better decision-making. In comparison to financial accounting, cost accounting has to follow a set standard ad can be used flexibly by the management as per their needs. The types of Cost Accounting include – Lean Accounting, Standard Costing, Marginal Costing and Activity Based Costing.
C Ltd has two departments A & B. Overhead is applied based on direct labour hours in department A and machine hours in department B.
The following additional information is available:
|
|
Department A |
Department B |
||
|
Budgeted |
$300,000 |
$360,000 |
||
|
Budgeted direct labour hours |
50,000 |
40,000 |
||
|
Budgeted direct labour cost |
$240,000 |
$330,000 |
||
|
Budgeted machine hours |
68,000 |
80,000 |
||
i) Compute the overhead rate for Department A.
ii) Compute the overhead rate for Department B.
iii) Given that the actual overheads were as follows
|
Direct labour hours Direct labour cost Machine hours Actual overheads |
Dept. A
45,000 $60,000 25,000 $285,000 |
Dept. B
35,000 $50,000 75,000 $320,000 |
Calculate the under- or over-applied overheads for each department and for the organization as a whole.
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